Judge's Fraud Ruling Goes Martha's Way

It was a rare break for Martha Stewart and her legal team Friday when the judge in the case informed prosecutors that they would not be able to call expert witnesses regarding the securities fraud charges against Stewart.

U.S. District Judge Miriam Goldman Cedarbaum said that she would not allow the government to present testimony from Wall Street analysts and other experts as to how Stewart may have influenced investors in her company, Martha Stewart Living Omnimedia, while she was defending herself against charges from the sale of nearly 4,000 shares of ImClone Systems stock, The New York Times reports.

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Stewart faces a couple different sets of charges in the government’s case against her. First, she is charged with lying to investigators about the ImClone sale. Prosecutors say that Peter Bacanovic, Stewart’s stockbroker and codefendant in the case, warned Stewart of the impending drop in the stock’s price and that she subsequently sold her shares.

Although neither is charged with insider trading, they are both charged with lying about the sale.

The other charge that Stewart faces — and the one that was dealt a serious blow by Judge Cedarbaum on Friday — is securities fraud. Government prosecutors claim that while Stewart was being investigated about the ImClone sale, statements that she made to investors in her company unfairly buoyed Omnimedia’s value.

Certain legal experts, including Judge Cedarbaum, have called the prosecution’s approach to this charge “unusual” and “novel,” the Times reports.

Friday’s ruling may make it much harder for the prosecution to prove its charge, since it will not be allowed to put experts on the witness stand to demonstrate its case. According to a person on Stewart’s defense team, the decision “renders the securities fraud charge dead on arrival,” The Times reports.

The prosecution is expected to rest its case on Thursday, and then Stewart’s defense will have to go to work. Among the main decisions facing her attorneys will be whether to allow Martha to take the stand in her own defense.

The allegations against Stewart have been backed up by some powerful testimony from government witnesses including Douglas Faneuil, an assistant to Bacanovic, and Ann Armstrong, an assistant to Stewart. Countering their damaging attacks may require Stewart to take the stand.

“The problem with not putting the client on the stand, particularly a high-profile client, is that so often the jury wants to hear from that person,” an attorney not involved with the case told the Associated Press on Monday.

The trial was in recess for the President’s Day holiday on Monday, but it resumes Tuesday.